- Result of ordinary business activity increases by 54 %
- Risk result improves
- Cost-income ratio considerably reduced
In the financial year 2012 Deutsche Hypothekenbank increased its result from ordinary business activity by 54.1 % to € 50.4 million year-on-year (prior year: 32.7). The substantial increase in income is attributable in particular to a rise in net interest income, an improved risk result and initial successes of the cost-optimisation programme, which has now been launched.
“Deutsche Hypo can look back on a successful financial year 2012. We were able to increase our net interest income substantially and at the same time considerably improve the quality of our financing portfolio,” emphasised Thomas S. Bürkle, Chairman of the Board of Managing Directors. “We have undeniably consolidated our position as one of the leading financers of commercial real estate in Germany.”
Net interest income tops € 200 million for the first time
Deutsche Hypo’s positive business performance can be seen above all in terms of the net interest and net commission income: whilst net commission income repeated the prior year’s strong result of € 10.8 million, the net interest income rose by 6.5 % to € 204.3 million (prior year: 191.9) and thus broke through the € 200 million mark for the first time. The core business area of commercial real estate finance made a key contribution to this, its net interest and commission income rising by 15.1 % to € 176.3 million, although at € 2,513 million new business fell slightly short of the volume of the prior year (2,769). As a consequence of a stronger focus on the core market of Germany, the share of domestic credit commitments rose to 67.7 % (prior year: 56.6). New business was once more centred around financing office and retail real estate.
Taking account the effects of risk provisioning, Deutsche Hypo’s risk result improved substantially year-on-year at € -72.0 million (prior year: -82.7), whereby the Bank continued to pursue its risk-conscious business policy. The reduction of selected securities as a component of active portfolio management in particular contributed to the income from securities and participatory interests of € -17.1 million (prior year: -11.3). The other operating income improved to € -2.4 million (prior year: -5.4). The bottom line is that Deutsche Hypo’s result from ordinary business activity was € 50.4 million (prior year: 32.7), equivalent to an increase of 54.1 %. This is the Bank’s best operating result since the beginning of the financial crisis.
Deutsche Hypo’s cost-optimisation programme, only launched in 2012 and envisaged to last until 2016, yielded its first successes by the end of the year: in view of the increase in employee numbers, administrative expenses merely rose at a disproportionately low level to € 73.2 million (prior year: 70.6). The cost-income ratio improved significantly to 34.4 % (prior year: 35.8).
Core capital ratio just under the 10 % mark
In 2012 Deutsche Hypo further strengthened its capitalisation. Key factors here were the retention of profits and the marked improvement of the financing portfolio, which resulted in a substantial reduction of risk-weighted assets. In light of that the core capital ratio increased substantially to 9.9 % (prior year: 8.4).
Deutsche Hypo continues to have a stable funding basis. Throughout 2012 the Bank was again able to fund at comparatively favourable conditions. The Bank’s issues were met with a consistently high demand from investors. Overall the Bank took on funds of € 4,254.1 million over the past year (prior year: 4,940.4). Of this € 2,407.3 million was attributable to Pfandbrief issues, and € 1,846.8 million to unsecured bonds.
Outlook for the financial year 2013
As far as the current financial year is concerned, Mr Bürkle appears confident that “the positive development in business performance will continue in 2013. The real estate markets, where our focus lies, continue to appear robust. However, we still need to see to what extent the currently predicted economic slowdown will impact the sector. It also remains to be seen whether the European sovereign debt crisis has already peaked and what further challenges the regulatory requirements entail.
“The cost-optimisation programme that has been launched will admittedly result in additional burdens in the short term, but in the medium term it will have a positive effect on the Bank’s administrative expenses according to Mr Bürkle. He expects that “the operating results of Deutsche Hypo will remain at a high level and that a further recovery will take place on the risk side. Overall we are optimistic for the financial year 2013.”